ETS for Building, Road Transport, and Additional Sectors (ETS2)

The recent revision of Directive 2003/87/EC extends the EU Emissions Trading System (EU-ETS) to include the buildings and road transport sectors, as well as other sectors not currently covered by the existing EU-ETS (now referred to as ETS1). This extension aims to further reduce CO2 emissions in line with the EU's climate neutrality objective. The European Commission estimates that including buildings and road transport in ETS2 will lead to a 43% reduction in their emissions by 2030, while the additional sectors newly covered by ETS2 will contribute to a 42% reduction in emissions.

What type of fuels are covered under the EU ETS2

The EU ETS Directive has identified the fuels covered under ETS2 as follows:

  • (un)leaded petrol,

  • gas oil,

  • kerosene,

  • LPG,

  • natural gas,

  • heavy fuel oil,

  • coal and coke;

  • any other product intended for use, offered for sale or used as motor fuel or heating fuel as specified in Article 2(3) of the Energy Taxation Directive (ETD). This includes any fuel additives used as motor fuel, certain bio-based fuels, and any other hydrocarbons for heating purposes, except for peat.

That means the following types of fuels are currently excluded from the ETS2:

  • Peat;

  • Waste used as fuels (hazardous or municipal waste used as fuel, as explicitly excluded from the ETS2 scope in Annex III of the Directive);

  • Waste-derived fuels (mostly used in ETS1 installations);

  • Solid biomass (e.g. wood-based fuels);

  • Charcoal from wood.

Implementation

ETS2 will be fully implemented from 2027 (or 2028 in case of exceptionally high oil and gas prices at the time of introduction) and will target fuels used in the building and road transport sectors, as well as other sectors. Starting in 2024, regulated entities (fuel distributors) will need to report the quantities of fuels they release on the market. From 2028, they will have to surrender a certain amount of emission allowances annually to offset the 2027 emissions and subsequent years.

An emission limit ("CAP") will be set in 2027 and will be gradually reduced to achieve a 43% reduction in emissions by 2030 compared to 2005 levels in the sectors concerned.

The importance of the monitoring plan

Thee approved monitoring plan (MP) is the most important document for every regulated entity participating in the ETS2. A template can be found on the CA website.

Competent Authorities in Belgium

In Belgium, the regions have been designated as competent authorities for ETS2:

The FPS Public Health, Food Chain Safety and Environment will act as the registry administrator. All ETS2 emission allowances will be subject to the auction system, with no free allocation granted (unlike ETS1).

To ensure market liquidity, 130% of the allowances foreseen for the first year will be auctioned. Additionally, a market stability mechanism similar to ETS1 will be implemented, along with an additional system to address sharp increases in energy prices.

Timetable for Implementation - Key Dates and Responsibilities

  • By 31st August 2024: Regulated entities must submit a Monitoring Plan for approval to the competent authority and open a registry account (See EU Guidance on Monitoring).

  • Before 1st January 2025: The National Competent Authority will approve the Monitoring Plan and issue a Greenhouse Gas permit.

  • 30 April 2025: Regulated entities must submit a report on historic emissions (2024) - non-verified.

  • 1st January 2025 (and annually thereafter): Start of the monitoring period for regulated entities.

  • 31st December 2025 (and annually thereafter): End of the monitoring period for regulated entities.

Each regulated entity must report their historical emissions for the year 2024 by 30th April 2025. They may require a Registered Entity Holding Account (REHA) to enter data on the Union Registry (UR). Following the initial report of their historical emissions, all regulated entities will be required to submit verified emissions reports by 30th April each year thereafter.

Further Information & Contact Details

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